US President Donald Trump’s border-barring policies aimed at making “America great again” may provide a boon for Canada, which has always lived in the shadow of its southern neighbor when it comes to attracting new talent, entrepreneurs, and big tech money.
Now, as the global high-tech community closely watches US immigration policies amid concerns they may hurt the prospects of work in Silicon Valley, Ontario, Canada’s second-largest province, is proudly touting its openness to immigration and diversity in a push to attract some of the big bucks and entrepreneurs to its shores.
The Trump administration and its immigration policies “are certainly an opportunity” for Canada, Andrew Guy, director of digital technologies and life sciences at the Ontario Investment Office told a gathering of foreign journalists on February 27, in an effort to showcase Canada’s tech scene. “People can build companies and create jobs in Canada. As the world changes so much, this is certainly a place where people can make their home.”
The investment office is an arm of the Ministry of Economic Development and Growth and the Ministry of Research, Innovation and Science.
In January, a group of Canadian technology company founders, executives and investors called for Ottawa, Canada’s capital, to provide temporary residency to the people displaced by a US order banning the entry of visitors from seven Muslim-majority countries, Reuters reported.
On March 6, Trump signed a revised, and somewhat toned down, executive order which reinstated his ban on immigration from some Muslim-majority countries.
In the January letter to their government, the Canadian companies said a number of people in the tech community had been affected by Trump’s January 2017 executive order.
“Canadian tech companies understand the power of inclusion and diversity of thought, and that talent and skill know no borders,” more than 200 industry players who signed the letter said, as reported by Reuters. “Many Canadian tech entrepreneurs are immigrants, are the children of immigrants, employ and have been employed by immigrants.”
US immigration policies and a potential change to the way work visas for foreign workers are issued “will be closely watched” by the tech community globally, Randall Lane, the editor of Forbes recently said in an interview with The Times of Israel.
The high-tech community in the US has expressed concern that Trump’s immigration policies will hurt its technological edge. Trump’s administration has also drafted an executive order that would change the way H-1B work visas are issued for foreign workers, Bloomberg reported in January. And tech companies depend on these to employ thousands of workers each year.
With a highly educated population — 67 percent of Ontario’s adult population has completed post-secondary education — with a GDP that is larger than that of Sweden or Austria, and with its export ties to some of the largest global markets, Ontario has the infrastructure to host a significant startup scene. Last year a delegation of Canadian officials visited Israel to learn how it is done in the Startup Nation.
“There is a thriving, growing tech scene in Canada, driven in some degree already by tech entrepreneurs who have immigrated to Canada,” David Shore, the Canadian representative of the Jerusalem-based crowdfunding venture capital firm OurCrowd, said in an email interview. “If the US has a more closed-door policy, Canada is a natural friendly alternative destination.”
Several years ago, Canada implemented a startup visa program designed to encourage tech entrepreneurs to move to Canada, he said. “Canada has established longstanding immigration policies that are designed to attract the best of global talent.”
The country has a highly skilled, highly educated workforce, a strong local capital environment and significant tax benefits for R&D, Shore said. Wages tend to be lower in Canada relative to Silicon Valley and the exchange rate versus the US dollar also helps. OurCrowd has already made investments in two Canadian technology companies: Wave, which has developed a suite of apps for accounting, and Influitive, which has created a marketing platform. “OurCrowd continues to actively look for new investment opportunities in Canada, ” Shore said.
Even so, Shore added, Trump’s policies are “unlikely” to impact Silicon Valley “due to the already massive concentration of both capital and technology companies there,” he said. “It may have an effect on peripheral centers, as tech entrepreneurs think ‘the Valley or nothing.'” And in those cases, Canada could be an alternative.
To take its place on the global tech scene, Ontario is touting its vast research and university facilities and its diversified populations, aiming to get the province, which is larger geographically than France and Spain combined, identified as a tech and startup hub, along the lines of Silicon Valley, Boston, New York, and Tel Aviv.
Their efforts have been fruitful — venture capital investment in Canadian companies set new highs in 2016, according to a Thomson Reuters report on the industry. A total of 459 Canadian companies closed 571 rounds of financing totaling $3.7 billion. This represented both a 15-year high in dollars invested and a 36% increase over 2015, a year-on-year jump not seen since the year 2000 when VC investment more than doubled over 1999, the report said.
Even so, the amount is still lower than the close to $5 billion Israeli tech companies raised that year, according to Israel’s IVC Research Center, or the whopping $69.1 billion invested VC funds in the US, down from 2015’s peak of $79.3 billion. Global VC activity declined 24% year-over-year in 2016, according to a KPMG report.
“In 2016, Canada bucked the downward VC investment trend experienced by many of its Americas counterparts, driven significantly by late Q4’16 deals,” the KPMG report said. “Despite quarterly fluctuations in activity, the Canadian VC market is clearly maturing and becoming an appealing area for US VCs able to invest beyond the border.”
In 2016, Canada saw numerous large investments, including the Americas’ biggest funding round during the fourth quarter: a Series A raise of $225 million by Toronto-based BlueRock Therapies backed by Bayer and Versant Ventures. The deal was the fourth largest globally in the fourth quarter of the year, according to KPMG.
Based on the work of Dr. Gordon Keller and Dr. Michael Laflamme, BlueRock seeks to use stem cells to regenerate heart muscle in patients who have had a heart attack or suffer from chronic heart failure. “The idea is to make whole organ transplant obsolete, and repair organs will stem cells,” Keller told the group of foreign journalists, including this one, who were hosts of the Ontario government.
The BlueRock deal, and a funding round by Hubba Inc. led by Goldman Sachs, “illustrate how the country is gaining attention on the investment radar of international VC investors and corporates,” the KPMG report said.
“We have long way to go compared to Israel,” in terms of the number of startups being generated in Canada, said Jon Rogers, the chief operating officer of Toronto-based XOR Labs, a medical device company that is developing a technology to repair lungs — and in future other human organs as well – to make them better suited for organ transplants. “But the government is making a push to make the country more innovative, and take better advantage of the great research available here.”
As an R&d company, XOR gets federal support which allows the startup to claim back 40 percent of everything the company spends on R&D, in cash, he said.
The company, which is in the process of raising some CAD15 million to develop its product, has grown from five employees to 10 in the past year and “could easily” double again in a year’s time, Rogers said.
Ontario is an attractive place to set up a startup, he said, because of its strong research facilities, and “unlike the US which is thinking in, we are thinking out.”
Creating a startup ecosystem in MaRs
To create a vibrant startup ecosystem, Ontario has set up the MaRs building, which prides itself as being the largest urban innovation hub in the world. Located in downtown Toronto, it is surrounded by local hospitals and just minutes away from the University of Toronto, the Ontario Brain Institute, the McMaster University, the Ontario Cancer Institute and the SickKids hospital.
“Toronto was not considered an innovation center, but MaRs has put us on the map,” said Cory Mulvihill, in charge of policy and public affairs at MaRS. “We have investors coming here because they know medical assets are coming out of here.”
Set up some 15 years ago, the initiative, a joint venture of the governments of Ontario and Canada, the City of Toronto and the University of Toronto, is today home to 100 startups and a total of some 200 entities including academic research bodies, VC funds and more established players who work in the fields of health, energy and environment, finance, commerce and education. The complex doubled its capacity a year ago and is now a 1.5 million sq. ft. complex, said Mulvihill.
The idea is to create a space in which the players can rub shoulders in coffee shops and take part in workshops and mentorship programs, to enable them to scale globally and also have a societal impact, he said.
The recent deals in Canadian companies “show the huge amount of momentum. And we expect that to continue,” Mulvihill said.
Life sciences and regenerative medicine is a field in which Canada can make a global impact, researchers and government officials believe. Ontario’s universities and research centers, at which insulin was discovered in 1922 and the first Alzheimer’s gene was identified in 1995, already have a history of discovery and innovation. Now, the aim is to make Ontario a global leader in regenerative medicine, using stem cells, first discovered at Toronto’s Princess Margaret Hospital, to revolutionize the treatment of degenerative diseases. This includes using the cells to repair damaged tissues and organs, like hearts, lungs or blood damaged by disease or reprogram the immune system to fight multiple sclerosis, for example.
“We aim to make Ontario a global leader in the development and commercialization of stem cell therapies,” said Duncan Stewart, the president and scientific director of the Ontario Institute for Regenerative Medicine (OIRM), which aims to promote stem cell and regenerative medicine in Canada. “We have the potential to address the most chronic degenerative diseases, and our regulatory environment is more favorable than that in the US or Europe. We have here an opportunity to create an international cell therapy and manufacturing clinical trial hub.”
Over 200 research programs are underway in Ontario, including stem cell biologists, tissue engineers and clinicians, and some teams are already focused on translating the clinical discoveries into products.
“We have had some successes, but we are at very early stages,” Stewart said. “The potential is huge.” Just as the cost of computers decreased as the technology improved, so will costs of stem cell therapies decline as the technology advances, he said.
Tissue Regeneration Therapeutics (TRT) is a biotechnology company that has discovered the richest source of mesenchymal stromal cells (MSCs): stem cells that are stored in the tissue that surrounds the vein and the arteries within the umbilical cord. These cells have powerful regenerative, anti-inflammatory and immune-regulatory properties. The company has patented the process by which the MSCs are extracted. TRT is now in the process of looking for strategic international pharma partners, the founder, Prof. John Davies, told reporters.
“Regenerative medicine is where we can set ourselves apart and be leaders in this space,” said Michael May, the president and CEO of the Center for Commercialization of Regenerative Medicine (CCRM), a nonprofit, public-private consortium that aims to help researchers accelerate the commercialization of the discoveries by helping build manufacturing capabilities, enabling clinical trials and creating a supportive regulatory network.
Set up in 2012, the organization currently has 70 employees and has helped launch six portfolio companies in the past 1.5 years. It is now setting up what it says is the world’s first regenerative medicine venture fund, aiming to raise some $150 million.
“The VC fund is a critical piece of the equation if you want to create a viable industry,” May said. “We have solid companies and the manufacturing industry is maturing. These successes need to be told so we can raise risk capital so we can grow. The momentum is happening now.”
May will be coming to Israel in May to set up CCRM in Israel to work with eight Israeli institutions, including Tel Aviv University, Hadassah Hospital, the Technion, Israel Institute of Technology and Ben-Gurion University of the Negev. The cooperation is part of a memorandum of understanding signed by Ontario and Israel last year, May said.
The fields of healthtech and biotech “stood out as an investor priority in all regions of the world” in 2016, and the trend is expected to continue in 2017, the KPMG report said.